Giant Zombie Insurer on the Loose
A “one-off” second-round bailout for AIG tickled investors, who celebrated the further dilution of their stakes in this far-too-big-to-fail monster by driving its shares up more than 25 percent in premarket trade. The poster-ghoul for the credit crisis said “BOO” with its largest-ever quarterly loss – a $24.47 billion, $9.05-per-share shocker.
Taxpayers are buying another $40 billion of the company. “This is a one-off, created solely for AIG,” a Treasury official said, adding that the funds would not come from the $250 billion bank capital purchase program. The new rescue package will allow the Fed to cut to $60 billion from $85 billion the total available to AIG under a credit facility set up in September. But don’t let that fool you. The bill for AIG is now $150 billion, and could climb higher.
The terms for AIG are very good; though compared to what is anybody’s guess. Certainly they can be credited with helping drive shareholder enthusiasm. AIG is getting a much lower interest rate on its government loans and will have special government-backed buyers for its distressed securities.
Good thing this is a one-off plan. The shock-and-awe value of new rescues in this era of crisis may start to wear thin as the price-tag for repairing Wall Street approaches a trillion dollars.
Deals of the day:
* Less than a month after walking away from Wachovia, Citigroup is in discussions to acquire another U.S. bank, the Wall Street Journal said, citing people familiar with the situation.
* Swedish state-owned power group Vattenfall said it had acquired the rights to build a wind farm off Britain’s southeastern coast for 35 million pounds ($55 million).
* Britain’s Aurelian Oil & Gas said it agreed to farm out a 40 percent interest in the Poznan concessions in Poland to private-equity-funded Canamens Energy Ltd.